Wednesday, April 12, 2017

Sold some Insas and Bought Power Root

Recently as Insas grew to a price point which I think I would like to forgo, I decided to sell a portion of the share and move a safer (I presume) stock.

Hence, I have decided to sell 10,000 units of Insas and Bought Power Root.


For those whom do not know Power Root, it is a company that sells the Alicafe and Ah Huat coffee brand. If I am a normal investor, I would have thought it would struggle in a crowded ready to drink coffee market. This market has Nescafe, Oldtown, Aik Cheong, Super brand, Pappa Rich and several more (even Starbucks included).

Despite these challenges, perhaps these figures would change some person's mind. Me included.

Power Root's financial numbers over last 7 years
I have separated the financial revenue into local sales versus international sales. This is because I think it is important to separate out and highlight its numbers from it overseas sales which has been rather impressive. From my reading a huge portion of its sales is from the Middle Eastern market. Today, Power Root has a plant in UAE as it has grown to a certain size which allows it to decide to build one and logistically, I think it will be positive for its operations in the future.


Translating those numbers into a chart, perhaps this is clearer and shows that the overseas revenue has grown from a negligible RM5 million in 4Q10 (Dec 2009-Feb2010) to RM50 million in its latest quarter. That is a 10x.

Local sales on the other hand has a respectable growth although not as strong as its overseas sales. Based on that trend, I would not be surprise that its overseas sales would exceed its local sales in the near future.

In terms of profitability?


I am not one of those who would sweat over quarter to quarter numbers. However if you look at the long term trend, it is fantastic. This shows that despite the tough market environment, the players are pretty obedient in terms of keeping their margin in check. I did not show the revenue numbers in comparison between Oldtown and Power Root but I can say that Oldtown's ready to drink business is smaller than Power Root. However, Oldtown's margin is better. Oldtown's challenge is its cafe chain, which I think is also doing a turnaround (although this is a different article from me in the future).

As I have seen, the management of Power Root are pretty solid. They are founded by three people and just recently, they have done an exercise to include a substantial shareholder towards its International Sales GM. It has converted the shares in UAE into the holding company. I think looking at its performance towards its international sales, it is fair.

Additionally, its dividend yield is at an attractive 4.35% and seems like growing. This business has very strong cashflow and I think I am just back to basics i.e. buying cashflow based company and with very minimal debt.

7 comments:

Petrol Head said...

Insas is still undervalued despite the recent subdued rally. It's ownership of Inari and Ho Hup alone can be valued at RM1.30. this excludes SYF and M&A to name a few.

felicity said...

Agree but thought needed dividend stocks.

Petrol Head said...

Understand your need for cash flow. Insas could possibly be a value trap which requires patience to be "realised".

felicity said...

Yes, patience is what I have. Power Root or any other of my investments are about being patient.

ronnie said...

Felicity,

Time to sell WCE as it has gone up

felicity said...

definitely not selling WCE. if it drops I am buying more. Freeing some of my sales to purchase that.

nixiao100 said...

It seems to me that the financial report shows Power Root takes very long time to collect money from customers and also pay suppliers very slowly. What do you think?